ZuFinG II – Strengthening the competitiveness and attractiveness of Germany as a financial centre

published on 25 November 2024 | reading time approx. 4 minutes

The German Future Financing Act (Zukunftsfinanzierungsgesetz – ZuFinG) was the first trick, but will the second follow quick?

Following the ZuFinG, which largely came into force on January 1, 2024, the German Federal Ministry of Finance sees a continued need for adjustment in order to further increase the attractiveness of the capital markets. The aim of the draft of German Future Financing Act II (Zukunftsfinanzierungsgesetz II - ZuFinG II) is to further strengthen the competitiveness and attractiveness of Germany as a financial centre and, in particular, to improve the financing options for young, dynamic companies. In addition, ZuFinG II is intended to implement a number of amendments to European legislation into national law.

In this article, we present the main changes planned in corporate and capital market law as a result of ZuFinG II. For the planned changes in tax law, please refer to the article by our tax colleagues.

On August 27, 2024, the German Federal Ministry of Finance presented the draft of ZuFinG II. This legislative package is intended to further implement the growth initiative adopted by the Federal Cabinet on July 17, 2024. A government draft is not yet available.

Based on the measures of ZuFinG the draft of ZuFinG II aims to further optimise capital market access conditions and make the tax framework more attractive in order to mobilise private growth and innovation capital. Another focus is on utilising capital for investments in infrastructure and renewable energies in order to accelerate the transition to a sustainable economy. In addition, the European requirements of the EU Listing Act will lead to significant amendments to the German Securities Trading Act (Wertpapierhandelsgesetz - WpHG), the German Stock Exchange Act (Börsengesetz - BörsG), the German Stock Ex-change Admission Regulation (Börsenzulassungsverordnung - BörsZulV) and the German Securities Trading Notification Regulation (Wertpapierhandelsanzeigeverordnung - WpAV). In this respect, we refer to our part 1 and part 2 on the EU Listing Act.

Enabling of so-called penny stocks

The planned amendment to Section 8 of the German Stock Corporation Act (Aktiengesetz - AktG) is intended to give stock corporations the option of issuing shares with a nominal value of just one euro cent. This would reduce the previous minimum nominal value of one euro per share. The introduction is to be implemented accordingly in the corresponding capital market regulations. The trend towards lower nominal amounts since the minimum nominal value was reduced to one euro per share in 1998 shows that lower nominal values improve the tradability of shares and are particularly advantageous for SMEs and growth companies with low share capital. As this should also facilitate capital increases and create fairer competitive conditions on international stock exchanges, a further reduction to one euro cent per share is a logical development.

Innovations in down- and delisting

The draft provides for new regulations on delisting and downlisting. In the case of delisting, the obligation to submit a purchase offer in accordance with the provisions of the German Securities Acquisition and Takeover Act (Wertpapiererwerbs- und Übernahmegsetz – WpÜG) is to remain in place. However, the decision on the delisting application is to become a binding decision, as the requirements are clearly regulated by law and investor protection is comprehensively guaranteed. In addition, the appropriateness of the consideration due to a purchase offer for delistings is to fall within the scope of the German Act on Appraisal Proceedings (Spruchverfahrensgesetz - SpruchG) in future.

For a downlisting to an SME growth market, the obligation to submit a purchase offer would no longer apply in future. This is justified by the fact that these markets have a comparable level of regulation to regulated markets and sufficient trading is still guaranteed. This will make downlisting considerably easier in future and may therefore lead to a company remaining on the capital market rather than delisting completely. The obligation to submit a purchase offer is also to be waived if insolvency proceedings have been opened against the issuer in order not to penalise creditors and to facilitate the restructuring of the company.

Implementation of the requirements of the EU Listing Act in prospectus law

In capital market law in particular, the planned changes are strongly influenced by the implementation of the requirements of the EU Listing Act, which has not yet come into force. ZuFinG II therefore provides for amendments to the German Securities Prospectus Act (Wertpapierprospektgesetz - WpPG). By amending the EU Prospectus Regulation (EU-Prospektverordnung - ProspektVO), the existing upper limit for the exemption in Section 3 WpPG of EUR 8 million within a period of 12 months is to be raised to EUR 12 million through the direct application of EU law.

A further simplification concerns English-language prospectuses. In future, there will no longer be an obligation to provide a German summary for a securities prospectus in order to simplify the issuing process.

Amendments to German Stock Exchange Listing Regulation

Under current law, the shares to be admitted must be sufficiently diversified. Based on this, Section 9 German Stock Exchange Admission Regulation (Börsenzulassungsverordnung – BörsZulV), for example, is to be amended in accordance with the Markets in Financial Instruments Directive (MiFID) to reduce the free float of shares to 10%. In the previous version, this was still set at 25%.

Implementation of the ESAP regulation

In December 2023, the EU adopted a European Single Access Point (ESAP) in the form of Regulation (EU) 2023/2859. This is intended to enable improved, centralised access to company and financial market data as well as sustainability information in the EU. This is intended to promote cross-border investments. The ESAP is to serve as a centralised access point for company data. The access portal will be operated by the European Securities and Markets Authority (ESMA). It is to be realised in stages by January 2030. Availability is planned by July 10, 2027 at the latest. ZuFinG II contains corresponding accompanying leg-islation, for example in the German Commercial Code (Handelsgesetzbuch - HGB).

First and foremost is the newly created Section 9d HGB, which is intended to create the conditions for the company register to also function as an ESAP collection centre. At the same time, Section 325 (1) HGB is to be amended in line with Article 23a (1) of the Transparency Directive. Accordingly, domestic issuers will in future submit their documents to the company register for two publication purposes: (1) for entry in the company register and (2) for dissemination via ESAP. This dual obligation applies to domestic issuers who are obliged to disclose their annual reports in accordance with Section 2 (14) WpHG. The other domestic issuers must in future disclose the documents in accordance with Section 114 WpHG and keep them available for ESAP.

Conclusion

Some regulations, such as the elimination of an acquisition offer in the event of a downlisting to an SME growth market, are to be welcomed due to their simplifying effect. Only time will tell whether ZuFinG II is really suitable for making the financial centre significantly more efficient and attractive. The continued endeavour to simplify the requirements for a stock exchange listing and to at least partially approximate the regulations to the successful US regulations is to be welcomed in any case (so-called Level-Playing-Field).